Some Thoughts on Hiring People

About once a day, I hear from someone who lists off a bunch of their investments, says that they don’t think their financial advisor is doing a good job with their money, and asks me what they should do.

My first advice to them is usually to dump their advisor and handle their investing themselves. It’s actually incredibly easy to do this given all of the investment tools available to people online today.

Don’t get me wrong: there are a lot of good financial advisors out there that actually do help people through tough spots and get their finances straight. However, there are a lot of mediocre ones out there that just sit on a person’s money drawing a commission while doing nothing for them. Even worse, there are some truly poor ones out there who actively do you a dis-service.

Here’s the thing, though: that statement is true of anyone who provides a service, not just investment providers.

When you hire someone to mow your lawn, some of them will do an immaculate job. Some of them will do a job roughly equivalent to what you will do. And some of them will drive the mower over your rose bushes.

When you hire a plumber, some of them will fix the problem you called them for in a jiffy and fill the remaining time performing maintenance. Some of them will fix your problem and then loiter. Others will attempt to fix your problem and wind up flooding your basement.

There are great people, there are mediocre people, and there are awful people, no matter what you’re trying to accomplish.

In fact, it doesn’t matter what the task is – as long as there is a minimum level of qualification (and I mean minimum), the biggest difference between the people you hire is the kind of person they are. Are they the person who goes the extra mile? Are they the person who is there to collect a paycheck (which is fine for some jobs, but not for others)? Or are they the person who is grossly negligent?

I have a few little tests that I use whenever I hire someone for any purpose, whether it’s an accountant or a gardener.

First, never hire someone going door to door. Find out about services independently and contact the service provider yourself. I almost always use my social network first to ask for leads before turning to the “Russian roulette” game of the yellow pages.

Second, get away from negativity, fast. One key thing to ask someone when you’re thinking of hiring them for a task is what they expect from the customer. This is usually an open door for a negative person to start blasting away at some of their “awful” customers from the past. If you start hearing this kind of negativity from anyone you’re considering hiring, back away quickly.

Third, ask them what they can do better than a competitor. If they can’t come up with anything, then they likely don’t pride themselves on their work, so if you don’t get an answer, reconsider your choice. If you’re proud of your work, you can almost always come up with some element that you do well.

You should also ask them about their experience. If they can’t quantify their experience in any reasonable way, then be wary. Many people will put up a big false front of experience just to try to get a job, which is inherently dishonest. I’d far rather hire someone new who admitted they’re new than someone who tries to vastly overblow their experience, because honesty is key when you’re hiring someone.

Finally, describe the job you want them to do and ask if they’re up to it. If their immediate reaction without asking any sort of follow-up is “Yeah, sure, no problem,” then I get nervous. That means they’re claiming to be able to easily do something without knowing what it is. This can be fine for things like mowing a simple yard or replacing a kitchen faucet, but if the job seems complex to you at all and they’re not asking any follow-up questions, consider someone else.

If a person manages to get past these five red flags for me, I’m usually at least somewhat confident in hiring them. What red flags do you have when hiring someone?

Another thing to consider is whether or not they have insurance. Even if they are good people, accidents happen and it is nice to know that you’ll be covered and that they won’t be stuck with a huge expensive repair if a pipe accidentally breaks and ruins something valuable.

I remember the first (and only) time I met with a financial advisor. Our company hooked up its employees with a “free consultation” with one of the major financial firms in our area. I was sent a 10-page questionnaire about my income, assets, expenses, retirement savings, etc. which I then had to submit to the agency *for their approval*. Hah!

When I went to their office, I expected some sort of demonstration or explanation of their value to me. I expected them to try and “sell themselves to me” a bit. Nope. All I got was a nod of approval. The guy basically just said “Ok, I’ve reviewed your file and I think I can work with you. My fee is $480 a year.”

I laughed out loud, grabbed my file, and walked right out the door. No thanks!

You’ve got to be kidding me, right? Do people actually pay this? How could it be worth $500 a year just to have someone do what I could be doing myself for the price of an online brokerage commission or two?

These investment “pros” are gambling and taking a crapshoot on any given investment vehicle, just as much as I am. They might like to pretend they’re more educated and make “smarter” investments, but it still boils down to a crapshoot. My opinion is that a layperson can make equally wise investment choices (with approximately the same chance of success) just by reading a few good investment magazines or websites periodically, and doing a modicum of research.

I mean even if I had $50,000 to invest, for a $500 fee, he’d have to earn 1% better than I could on my own, *for me just to break even.* I’ll take my chances with my little layman pea brain, thank you.

Julia, I agree. When adults solicit at my doorstep, it is a major turn-off. (I actually had a financial advisor knock on my door earlier this year, funny enough. I laughed him off my porch too.)

When kids do it, for whatever reason, I tend to admire it more. Especially these days, so few kids have the drive to go generate work for themselves. Shoot, I was working for a local restaurant stacking wood and sweeping cigarette butts out of the parking lot for a local restaurant when I was a kid. Any kid who is willing to get dirty for some spending money is probably going to grow up to be a productive citizen.

Trent, I’m surprised you didn’t at least mention the most obvious hiring screening method: referrals or references. Just ask your neighbors who they know. Unless the work you need done is unique, chances are good that people you know have already been through this and can give you a recommendation. This is particularly true in smaller towns.

There is also Angie’s List, although like any impersonal (and potentially anonymous) Internet-based review system, I’m sure it could potentially be gamed (fake positive reviews planted) by a less-than-honest person.

“Second, get away from negativity, fast. One key thing to ask someone when you’re thinking of hiring them for a task is what they expect from the customer. This is usually an open door for a negative person to start blasting away at some of their “awful” customers from the past. If you start hearing this kind of negativity from anyone you’re considering hiring, back away quickly.”

I wish I read that before I hired my ex-babysitter. I would add to pay attention to an over all negativity – sometimes it’s not the previous customer or employer they complain about – sometimes is just all sorts of little things that show you they are always a victim… Highly recommend avoiding the professional victims out there…

Financial services are a unique beast compared to the other services you’ve discussed here. For example, if a lawn service drives over your rose bushes or a plumbing service floods your basement while trying to repair a problem, there is hardly an expectation that you will be expected to pay for that damage. In fact, there’s a pretty good chance that you won’t even have to pay them the full price of their original services.

However, if a financial service does a lousy job managing your money, barring unethical or illegal actions, there is basically no recourse to recoup either the ‘damage’ done to your investments or the fee that you have paid for managing them.

Hence I will manage my own investments, but gladly pay someone to fix my plumbing.

Leads and references are not the same thing. Leads and referrals aren’t even the same thing.

A “lead” is, I know this guy who might be able to fix your furnace. A “referral” is, I can’t fix your furnace but here is the card of someone who can. A “reference” is, I did work for this person and you can call them to ask how it went.

I agree, this is a big one that was glaringly obvious to me. If the worker you are hiring is not from a bonded, licensed company, then you need to ask for references from his/her previous clients.

On the flip side, if you are a freelancer of any kind, you need to ask your clients if they are willing to give you a reference.

I am a financial advisor. One thing I find amazing is the amount of people who assume that I will take them as a client. I a very selective about who I will do business with. Why would any good advisor take just anyone to work with?

My husband decided to go to it on his own and we’re doing pretty well. We lost $1000 up front while he was learning 5 years ago, but it’s been all good since then. $1000 is the cheapest financial school that I know of…

With respect to your advice to avoid negativity:
I have had a number of friends who chose realtors when selling a house and were “insulted” by the comments made about their house and why it wouldn’t sell for top dollar. They went with the realtor promising the highest return and giving the sunniest estimates. Turns out the “negative” realtor was accurate in the original assessment.

A few things I have learned. First, make sure the guy you were so impressed with is actually the one doing the work-sometimes aspects get sub-contracted or you have the least experienced workers coming in and the boss is off taking care of the corporate job. Second, get multiple estimates. Ask to see previous work which has been done, and talk to those who had it done. Most good workers are happy to show off their work.

If someone generalizes about what makes a good customer, per your question, they should also be allowed to state what makes for a difficult or problematic customer relationship WITHOUT that being viewed as negative.

Customers who change the job specs and want to keep the same price; customers who pay late or not at all; customers who make life hell for a vendor…these are a part of life.

I’d ask the question differently. Not, what you “expect” from a customer, but how they structure the customer relationship and ask them to go through the process. That is more important and relevant for me to know as a possible customer.

I’ve been in both positions, buying and selling business services and it is complicated. All too frequently, it’s a customer who can cause the issues and not vice versa. Consider that negative? Well, then you assume every customer is “right” even when they don’t follow or honor their end of the contract.

A big red flag for me is if they don’t return phone calls. Contractors seem to be really bad about this…we’re trying to get estimates to get our house sided, and it is like pulling teeth to get a return phone call from some of these people. Maybe they just don’t want the business!

In over 20 years of dealing with skilled workers, technicians, and professionals, my most effective “test” is to ask them to explain to me what they are doing or how they will proceed with a task.

The really good ones will easily explain things in terms you can understand. Others may struggle, but can still convey that they know what they are doing. Others will just talk themselves into a knot or say very little. Literacy and articulateness may be factors here, but you can use other clues to supplement your final opinion of their usefulness to you.

If the subject matter is completely outside your experience, read up a little. That’s what the internet is for.

I have found that this approach works for me when dealing with pretty much any profession, from electricians, to medical doctors.

I’m a financial adviser in the UK, holding the international CFP designation and the local Chartered Financial Planner status. I’m 30 years old, having worked in this profession for ten years.

The tests suggested by Trent make real sense. In fact, it always makes me nervous when a new client engages with us without asking any challenging questions. Choosing a financial adviser is an incredibly important step so good due diligence is needed.

Some of the comments here seem to miss the point about what financial advisers actually do, certainly here in the UK. Our role is not about making investment recommendations to make more money than an investor could make on their own. If someone comes to me with that goal, I’m unlikely to accept them as a client.

The greatest value we add is in Financial Planning and constructing suitable investment portfolios. Of course it is possible for some people to do this themselves, assuming they have the time, knowledge and inclination.

Trent, you have hit the nail on the head with not needing a financial advisor! WAKE UP FOLKS, TRENT’S RIGHT! The financial advisor’s job is to take your money and put it in his pocket. If you insist on hiring someone, do NOT do it commission based!!! Find somone whose advice you want and pay a flat fee for a certain number of hours of advice. This way the “advisor” is not inclined to “churn” your account, i. e. do a lot of buying or selling to generate comissions for himself. You can do this! If a financial advisor was any good, WHY WOULD HE WORK FOR YOU? He’d be managing his own money or be in the pay of Warren Buffet. The rest of the “financial advisor” pool is a bunch of sharks swimming along, looking to remove your money from you and take it for themselves. I manage my own investments, never had any finace courses, and my stocks are doing great. Watch the political situation, follow the market a bit, buy classic stocks WHOSE COMPANIES’ FUNCTIONS YOU UNDERSTAND (No Enron, no Global Crossing!) and set up your accounts on a DRIP (dividend reinvestment program.) First thing, before you invest a lot, is to pay off those credit cards, car loans and personal loans. Saving money to earn 1% while paying 9% on a car loan, 18% to 23% on credit cards, and 5% on a mortgage (with PMI) is bad money management. Of course if your employer offers a 401K match or you’re elligible for a ROTH, it behooves you to try to max out those two. The ROTH is imperative, because you can never get back the opportunity to make that year’s contribution, and begin generating tax free income for life on that money. The “match” in the 401K is actually income, so that pays you more for saving. A regular savings account once you max the ROTH or the 401K contribution, is kind of a waste when the money could be getting rid of high interest debt, to pay off the debt is good money management.

I forgot to stress that the money you put in the ROTH IS invested, but because you have placed the money in a vehicle where it generates tax free income for life, YOU EARN MORE MONEY ON THESE INVESTMENTS than if you don’t put it in the ROTH. Money invested inside the ROTH generates tax free income, if you don’t put that money in the ROTH when elligible, you then must pay income tax on the investments of that money outside of the ROTH, FOR LIFE. The ROTH contributions can also be withdrawn any time without penalty (Never do this if you can help it!) because the money going into the ROTH was previously taxed. If you use a traditional IRA and are gambling that income taxes in the future will be lower, you are an optimist. If you take your money out of the traditional IRA early, you face taxes and large penalties. A ROTH is far, far superior to a traditional IRA.

@the other tammy RIGHT ON! My partner and I are trying to upgrade our house, and I cannot tell you how many calls we have made to various contractors have gone unreturned. It’s like, I’m trying to spend my money…I know the economy is bad…why won’t you call me back?

What’s funny to me too is that I am an independent contractor, running my own business (iphone app and mobile website development). I can’t imagine treating any of my clients the way some other contractors do. I think the fact that I have my own business makes me all the more conscious of how other contractors should behave.

Calls returned late are a major indicator of bad work. @Kate–When I owned my own home, it astounded me that male contractors don’t return calls to women homeowners. I literally had to get my male coworkers to make my calls for me. Of course, these are likely to be the same contractors who rip men off, too: male chauvinism is a dishonesty game, and lack of ethics has no boundaries.
The people I know who are getting work in this hideous economy are getting their subsistence jobs precisely by temporarily shelving their pride and, indeed, going door to door. Those who prefer to lay around on their various welfare checks are not out their beating their feet to pavement pulp.

@Kate
Two years ago, we hired a company to re-roof our garage. We gave them a bank check for half the money down, they said they’d start next week…and then…nothing. My husband’s calls went unreturned for two weeks, and finally when I found out that my bank check had been cashed, I called and left a message saying basically “You will return either my phone call or my money by 5 pm tomorrow. If not I am pursuing legal action.” Guess what? They called back, all apologetic because it had been raining and they had been delayed on other jobs. I said, “Well, if you had called me back, that would have been fine and I wouldn’t have gotten so mad!”
Bottom line–it’s not hard to pick up the phone! :-)

I’m looking to hire some scrapbook instructors and card makers
and just reading for ideas to know how to know If they will be sellers before I hire them. Thank you for sharing your ideas. Sherrill Graff istmpnv@aol.com

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